Apr

22

 12 insights about markets and life from reading Ken Roman's The King of Madison Avenue and The Unpublished David Ogilvy.

1. Be unorthodox and imaginative in your hiring. Ready to hire people with unusual backgrounds. Would you hire this man for an advertising executive? "He is 38 and unemployed. He dropped out of college. Has been a cook, a salesman, a diplomat and a farmer. Knows nothing about marketing. And has never written any copy. Is interested in advertising as a career at the age of 38, and is ready to go to work cheap." It was Ogilvy himself who 3 years later became the most famous copywriter in the world and built the eighth biggest ad agency.

2. Treat women as if they are as knowledgeable as your wife when you advertise to them. They don't like to be talked down to or treated as robots. Peter Lynch and Jim Cramer are not the only investors who got 10 baggers from their wives.

3. The purpose of advertising is to sell a product. Make sure you go for the sale. Forget about aesthetics. Learn from the mail order ads where everything is tested, and no ad continues unless it pays it way. Forget about the 3rd and 4th moments in your quantitative measures and concentrate on making a profit on your trades.

4. Don't show off or try to be funny. It doesn't go well in print. It demeans the readers' intelligence. If you show off in a trade or competition, it will defuse your energy, and take you away from the bottom line.

5. Always hire a secretary of the same sex as you to make appointments. It will show you're interested in business and not in romance. And it will prevent you from being too expansive if the romance doesn't work out, or too soporific if it does. You have to be alert to be successful in markets.

 6. You never know someone's character until the chips are down. Everyone's a good winner. Choose side men of unquestioned integrity, preferably eagle scouts, or those who follow the code of the west. Roman himself was not gifted by an excess of loyalty from his mentor when the chips are down. Don't expect your clearing firm to give you the benefit of the doubt in a tight situation. They have to worry about their stockholders and when you are down, there is ample opportunity for them to make a profit against you, the same way a poker player can when he knows you can't withstand a big bet.

7. Always be reading good biographies. Ogilvy was an incessant bio reader and used the lives of the greats as examplars for building his international operation. The best bio of a market person I have read is MFM Osborne's biography by Melitta Osborne and Tom Wiswell's proverbs. Both are available on the DailySpec.

8. Write 100 headlines and read everything about your competitors and your product before you write your ad. Be ready to test 100 systems until you find one that really works and is not subject to ever changing cycles.

9. Surround yourself with people that have talents that are different from yours. Ogilvy knew nothing about finance or tv or computers, and hired good people to fill in the gaps. If you're a macro guy, hire a micro guy to get you on the right track. The palindrome hired me because I could get him a tick or two, and that was enough to start the steam roller going.

10. Work hard. Oglivy supposedly worked 120 hour weeks, and drove his wives crazy by working all through the night. The little bit extra is the difference between success and failure. I won countless matches in squash by diving for shots while my opponents were apologizing for hitting it off the wood.

11. Be prepared with a good defense. Ogilvy wrote what Fortune described as the best sales manual ever for the aga cooker. In it he enumerates 10 common reasons for not buying the product and shows how to turn each objection into a sale. Are you ready on your trades to turn your losses into profits, to survive if it goes against? Prepare a manual of defense and stick to it.

12. Be ready to learn from and compliment your competitors. Ogilvy often walked out of a meeting and told the prospect to go with his competitor because the other side was better. Practical investment people can learn much from the academics, and the fundamentalists and the technicians should be friends.

Andrew Goodwin writes: 

I was thinking about what you said about how you shouldn't expect your clearing firm to give you the benefit of the doubt in a tight situation.

That doesn't make sense unless one gets preferable margin callings or the like due to status as a .01% large player. There is a mathematical sweep or a reg T margin from most brokers one can find who run a tight ship.

For my part, I'd like to see how the clearing firm traders use the customer position data. If you know someone is levered up the gills and has to post more money at certain levels, then of course they will take the other side if there are no Chinese Walls.

Long ago, I saw an indicator in print which showed the margin purchases versus the cash purchases of Merrill Lynch customers. When optimized it had reversion results that were nearly perfect for the many years preceding the printout.

If you know the margin call levels for the largest number of the public customers on Reg-T, then one should fade the mandatory liquidation levels once crossed with little caution. That's why you buy stock in brokers and hope they don't pay themselves all the trading profits in bonuses.


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